Wall Street Feels the Heat
July 14, 2008 at 5:40 AM (PT)
The market for risky U.S. loans is sinking back to lows not seen since the collapse of BEAR STEARNS COS. this year reports THE WALL STREET JOURNAL [Requires registration]. A recurring nightmare for underwriters still stuck with more than $50 billion of leveraged-buyout debt.
The average price on loans outstanding has fallen to a three-month low of 88.4 cents on the dollar, according to the Leveraged Commentary & Data unit of STANDARD & POOR'S, approaching the low of 87.3 cents during the turmoil in MARCH when the government orchestrated the investment bank's rescue.
FRIDAY, LCD reported that the banks underwriting CLEAR CHANNEL COMMUNICATIONS INC.'s leveraged buyout had offloaded part of the financing -- at 85 cents on the dollar.
"The most frightening thing for the underwriters is, there's no way for them to lay this risk off; they can't hedge this risk," said MARK BOYADJIAN of FRANKLIN TEMPLETON FIXED INCOME. "It's become this elephant in the room. You either own it or you sell it. You can't hold it on your books and be patient by hedging it. There are very few counterparties that are worthy counterparties to do that trade with."